Evolution aspires to fill a golden hole

Evolution Mining
executive chairman
Jake Klein
believes his company could provide the model that leads to a rejuvenation of the Australian gold sector beneath industry giant Newcrest Mining.

Speaking at the Sydney Mining Club yesterday, Mr Klein lamented the current situation in which Newcrest accounted for 55 per cent of the market value of all gold miners listed on the Australian Securities Exchange.

Despite Australia still being the second-largest producer of gold behind China, he said a lack of choice and other factors meant the country risked fading into irrelevance from a global investor’s point of view.

“ ‘High cost, lacking investment opportunities, relatively mature as an exploration region and just not worth the effort,’ are often what you hear from investors on offshore road shows," Mr Klein said.

“That’s usually followed by, ‘If we want gold exposure in Australia we’ll buy Newcrest because that’s our only option.’ "

Evolution was formed last year through a complex three-way deal involving the merger of junior gold companies Conquest Mining and Catalpa Resources and the purchase of Newcrest’s Queensland assets.

Mr Klein’s aim in putting the company together was to provide “an alternative investment opportunity" that didn’t have the constraints of single-asset gold juniors and could be categorised as mid-tier.

“Empirically, there is no doubt that this is the space that has consistently delivered superior returns to investors," he said. “These companies typically have annual production between 400,000 and 800,000 ounces and a market capitalisation of between $3 billion and $7 billion.

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“Using this definition, Australia doesn’t have a real globally competitive mid-tier or intermediate gold company, although it’s certainly a place which Evolution is aspiring to occupy."

He pointed to North American companies Randgold, Eldorado Gold and Newgold as examples of mid-tier gold miners that had captured the attention of investors and been rewarded with premium share price ratings.

Another statistic Mr Klein highlighted was that two-thirds of the gold produced by locally listed companies comes from mines in other countries.

Evolution’s four mines are in Australia (three in Queensland and one in Western Australia).

Despite the changing legislative environment and rising costs, Mr Klein said he was more than comfortable operating here.

“Australia represents one of the most secure and robust environments to secure title and for an investor to be confident that they will be able to mine, without government intervention, what they discover," he said.

Evolution is forecast to produce between 335,000 and 375,000 ounces of gold this financial year and has a market capitalisation of $1.2 billion.

Newcrest is the company’s largest shareholder, having taken a 33 per cent stake in return for its Mt Rawdon mine and 70 per cent stake in the Cracow mine.